Anchorage Daily News

WASILLA -- Four years after enacting laws on the relatively new industry of coal bed methane drilling, the Matanuska-Susitna Borough still lacks rules for good old-fashioned conventional natural gas wells.

That's about to change.

With high energy prices driving speculators into populated parts of the Mat-Su, borough officials say, they're putting together a new conventional gas ordinance.

The state already requires that conventional gas developers get permits to protect oil and gas resources, as well as water quality. But the Mat-Su law would add local protections, such as restrictions on how far wells can be from buildings.

Already, there's enough interest that the plans of at least a few operators are ahead of any new local law.

Two years ago, Storm Cat Energy drilled a well near Horseshoe Lake on Mental Health Trust lands. The company hoped to test that well this year, but is struggling to find a drilling rig for the job, said Mike Franger, the trust's senior resource manager.

Another company, GeoPetro, in October plans to drill an 8,000-foot conventional gas well on 40 acres owned by Knikatnu Inc. in the Point MacKenzie area. The San Francisco company is looking for a "farm-out partner" to share financing, said Eric Doshi, who does investor relations for the company.

Two other companies are eying Mat-Su gas.

Lapp Resources Inc. is in the process of getting a state license to explore possible drilling on more than 21,000 acres from Houston to Nancy Lakes, and over to the Talkeetna Mountains. Owner David Lappi did not return requests for comment about the status of his plans and where any future wells might be located.

Another company, Pacific Energy, also holds leases in the Point MacKenzie area. A representative did not return a call for comment.

Several landowners have reported hearing from various companies interested in drilling on their land.

TOO LATE, OR TOO ONEROUS?

The borough enacted its coal bed methane law in 2004 after plans for widespread drilling by Colorado-based Evergreen Resources triggered fears of water contamination and private property invasions.

Drilling for methane trapped in watery coal seams tends to create a dense cluster of shallow wells, each with a mini industrial complex, sometimes in people's backyards. Conventional gas, on the other hand, usually involves solitary, deep wells.

At the time, the methane ordinance was thought to be the strictest in the country. Fowler Oil and Gas Corp. last year became the first driller to get a permit under the law. Fowler has yet to start production.

The borough's mistake was not enacting a conventional gas ordinance when it passed the methane rules, said Kathy Wells, executive director of Friends of Mat-Su, a Palmer-based pro-planning group with about 350 members.

Four years ago, Wells said, she started pressing former borough planner Murph O'Brien to regulate both kinds of natural gas operations because otherwise it's too easy for companies to say they're going for conventional gas to get around the methane permitting process.

"We know we need gas, we understand that, but we're back to the old 'what is responsible development?' " she said. "Yes, we need gas wells here, but not next to houses. The pressure is going to be unbelievable as energy prices rise."

While some say the borough dragged its feet getting a conventional gas law on the books, others say another layer of regulations could chill future interest in gas drilling.

The hurdles posed by a local permitting process could scare off potential developers, the Trust's Franger said.

"The thing is, there's already statutes and regulations in place that govern those things," he said. "So any time you add more to it, then it doesn't make it any easier. The state in particular has some pretty stringent regs."

LAW EVOLVING

The borough needs its own layer of regulation because the state doesn't address drilling activities in residential areas, said Borough Manager John Duffy

"Those firms that take a look at it, apply and get the permits are actually the firms we'd like to have here," Duffy said. "By working through the process, they acknowledge they have to be good neighbors."

Asked why work on a conventional gas law waited so long, several borough officials said they faced a long list of priorities, including a new prison, Knik Arm ferry, transportation and zoning policies.

Work on the gas ordinance began in April, said Eileen Probasco, the borough's planning chief. She expects a draft ordinance out for public review within about a month.

The ordinance is based on one developed in Austin, Texas, Duffy said. Officials also paid $3,000 to consultant ASRC Energy to provide advice. The company is a wholly-owned subsidiary of Arctic Slope Regional Corporation.

The earliest any law might be enacted is December, though that's a very optimistic timeline, Probasco said.

It takes time to develop a solid ordinance on such a technically complicated and "politically hot topic," she said.

Find Zaz Hollander online at adn.com/contact/zhollander or call 907-352-6711.

The new ordinance

The early scoop on the gas law: The Matanuska-Susitna Borough is writing a new ordinance to address conventional gas operations. The proposal calls for companies to get a gas-well permit, with conditions determined in part by how close the well would be to homes. Borough officials emphasize that the ordinance is still at a very early stage, with topics such as setbacks still in flux. They expect to release a draft version for public review in about a month.

That said, here's a peek at some of the proposals presented in the 74-page draft document:

• Any well must be at least 200 feet from homes, churches, hospitals, schools, parks and any other protected use.

• A "gas inspector" would take on many tasks: review permit applications; enforce the ordinance through inspections and reviewing records, and consider alternative technologies and waivers.

• Notice of permit applications would be sent to residents within 1,000 feet of the proposed well and to community councils within a half-mile.

• An operator would have to post a $50,000 bond for each well.

• No well could be drilled within 200 feet of a freshwater well. Any compressors would have to comply with borough noise requirements.

Find Zaz Hollander online at adn.com/contact/zhollander or call 907-352-6711.

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